By Stephen Morris and Trista Kelley
Three Barclays Plc analysts in New York have left the bank to set up their own firm in anticipation of the upheaval caused by European rules that will ban free research, according to people with knowledge of the moves.
Scott Davis, Carter Copeland and Rob Wertheimer resigned this week to start a boutique called Melius Research LLC, said the people, who asked not to be identified because the plans aren’t public. Davis, the top-ranked analyst in his sector by Institutional Investor, covers industrials including General Electric Co. Copeland follows aerospace companies, while Wertheimer covers machinery companies such as Caterpillar Inc.
A U.S.-based spokesman for Barclays declined to comment. Davis, Copeland and Wertheimer couldn’t be reached or declined to comment.
The EU’s MiFID II regulations are designed to eliminate conflicts of interest by requiring asset managers to separate trading commissions from investment-research fees. The law is likely to upend the industry when it is introduced Jan. 3: McKinsey & Co. estimates investors will slash more than $1 billion of spending as banks shrink or eliminate their research arms, triggering hundreds of job losses.
The analysts decided to strike out on their own because they believe U.S. money managers will adopt the new European standards, one of the people said. The McKinsey report predicts banks’ income from research is likely to plunge 30 percent as investors become pickier about what they pay for, with most only willing to stump up for the top-ranked analysts.
Melius, based in New York, will initially employ about 15 people and is considering hiring more analysts to expand into energy and health-care coverage, one of the people said. The founders are mulling a two-tier pricing structure, split between a read-only option and a full-service package offering conferences, field trips and more access to analysts and corporate executives, they said.
Based on current average market prices, Melius may charge about $15,000 a quarter for read-only access, rising to $40,000 for the all-in option, the person said. The firm will also offer a “concierge” service for the largest firms that want to commission bespoke analysis, they said.
View the original Bloomberg article here.